But I’ve just been skating along the surface. My Cato colleague Chris Edwards (a Canadian transplant) has just written up a report with some of the key details.

Two decades ago Canada suffered a deep recession and teetered on the brink of a debt crisis caused by rising government spending. The Wall Street Journalsaid that growing debt was making Canada an “honorary member of the third world” with the “northern peso” as its currency. But Canada reversed course and cut spending, balanced its budget, and enacted various pro-market reforms. The economy boomed, unemployment plunged, and the formerly weak Canadian dollar soared to reach parity with the U.S. dollar. …[In] the early 1990s combined federal, provincial, and local spending peaked at more than half of gross domestic product (GDP). In the 1993 elections, Prime Minister Jean Chretien’s Liberals gained power promising fiscal restraint, but this was the party of Trudeau, and so major reforms seemed unlikely. In the first Liberal budget in 1994, Finance Minister Paul Martin provided some modest spending restraint. But in his second budget in 1995, he began serious cutting. In just two years, total noninterest spending fell by 10 percent, which would be like the U.S. Congress chopping $340 billion from this year’s noninterest federal spending of $3.4 trillion. When U.S. policymakers talk about “cutting” spending, they usually mean reducing spending growth rates, but the Canadians actually spent less when they reformed their budget in the 1990s. The Canadian government cut defense, unemployment insurance, transportation, business subsidies, aid to provincial governments, and many other items. After the first two years of cuts, the government held spending growth to about 2 percent for the next three years. With this restraint, federal spending as a share of GDP plunged from 22 percent in 1995 to 17 percent by 2000. The spending share kept falling during the 2000s to reach 15 percent by 2006, which was the lowest level since the 1940s. …The spending reforms of the 1990s allowed the Canadian federal government to balance its budget every year between 1998 and 2008. The government’s debt plunged from 68 percent of GDP in 1995 to just 34 percent today.

Total government spending, including sub-national units such as states and provinces, is still slightly higher in Canada than in the United States. But I suspect that will change within the next five years.

Not surprisingly, good spending policy leads to good tax policy, as Chris explains.

a slimmed-down Canadian government under the Liberals enjoyed large budget surpluses and pursued an array of tax cuts. The Conservatives continued cutting after they assumed power in 2006. During the 2000s the top capital gains tax rate was cut to 14.5 percent, special “capital taxes” on businesses were mainly abolished, income taxes were trimmed, and income tax brackets were fully indexed for inflation. Another reform was the creation of Tax-Free Savings Accounts, which are like Roth IRAs in the United States, except more flexible. The most dramatic cuts were to corporate taxes. The federal corporate tax rate was cut from 29 percent in 2000 to 15 percent in 2012. Most provinces also trimmed their corporate taxes, so that the overall average rate in Canada is just 27 percent today. By contrast, the average U.S. federal-state rate is 40 percent. …Canada’s federal corporate tax rate has been cut from 38 percent in the early 1980s to just 15 percent today. Despite the much lower rate, tax revenues have not declined. Indeed, corporate tax revenues averaged 2.1 percent of GDP during the 1980s and a slightly higher 2.3 percent during the 2000s.

The Laffer Curve effect of higher tax revenue shouldn’t be surprising, though American policymakers still operate in a fantasy world where taxes are assumed to have no impact on the economy and no impact on taxable income.

But that’s a secondary point. The main lesson of this research by Chris is that it is both possible and desirable to shrink the burden of government spending.

And it’s not just Canada that has done the right thing. This video outlines past reforms in Ireland, Slovakia, and New Zealand as well.

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Aside from the healthcare problems, Canada has significant issues with free speech. For example, their draconian importation laws ensnared a number of enthusiasts of anime and manga. Americans may be ashamed of the Headley case, but Canadians are a thousand times worse (by the number of victims).

“The Canadians aren’t know for having a sense of humor”? What an odd thing to say given the high number of Canadian comedic talent employed in Hollyweird. Actually, I think it is our sense of humour that keeps us from loosing our sanity during the winter months! Either that or we are all barking mad!

You should also take note of the fact that Canada’s Finance Minister Jim Flaherty has on numerous occasions spoke out against the Obama Administrations “FATCA” legislation. Here is what he had to say:

Many Canadians, however, have become concerned about the impact of a proposed piece of American tax legislation – the Foreign Account Tax Compliance Act, or FATCA.
I share their concern.

We appreciate efforts to combat tax evasion. In fact, our two jurisdictions co-operate to prevent it. But FATCA has far-reaching extraterritorial implications. It would turn Canadian banks into extensions of the IRS and would raise significant privacy concerns for Canadians.

To be clear, Canada respects the sovereign right of the United States to determine its own tax legislation and its efforts to combat tax evasion – the underlying objective of FATCA.

But put frankly, Canada is not a tax haven. People do not flock to Canada to avoid paying taxes. In addition, we have existing ways of addressing these issues with the United States through our Bilateral Tax Information Exchange Agreement. As I said, we share the same goal of fighting tax evasion and we already have a system that works.

To rigidly impose FATCA on our citizens and financial institutions would not accomplish anything except waste resources on all sides.

Flaherty has also an repeated occassion referred to FATCA as “red tape”

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